Lowe’s Companies, Inc. (LOW, Financial) reported its second-quarter earnings results on Aug. 19. The company’s quarterly results were slightly mixed as sales grew strongly while earnings fell just below expectations. The strong sales growth report followed a strong quarter in the housing market which has continued to be a catalyst for many large home goods stores.
For the quarter the company reported revenue of $17.4 billion, net earnings of $1.1 billion and earnings per share of $1.20. Revenue beat analysts’ consensus estimate by $30 million while earnings per share missed the consensus expectation by $0.04. Top line revenue grew 4.5% for the quarter. Revenue for the first half of the year also reported steady growth up 4.9% to a total of $31.5 billion.
Comparable store sales growth was strong in the second quarter helping increase the top line revenue total overall. For the quarter the company reported comparable store sales growth of 4.3%. Within the company’s U.S. home improvement business, comparable sales increased 4.6%. Furthermore, the company reported that each of its geographic regions posted positive comparable sales growth during the quarter and 11 out of 13 product lines had positive comparable sales growth.
In terms of earnings, it appears added margin pressure in the second quarter from big ticket items dragged just slightly on the bottom line resulting in the lower-than-expected earnings per share result. The firm attributed its increase in big ticket item sales primarily to the improvements in home prices and the housing market in general which have caused greater demand for items such as large appliances. The increased demand for big-ticket items was also helped by the firm’s initiative around the professional customer. In the second quarter the firm relaunched its lowesforpros.com website which also contributed to its increase in big ticket items sales overall.
Despite the slightly lower-than-expected earnings per share results, earnings per share for the company grew 15% from the comparable quarter and net earnings were up 8%. For the first half of the year earnings increased 8% and earnings per share were up 16%.
For the second half of the year the company’s earnings momentum appears likely to continue at the same pace. It reportedly expects sales growth of 4.5% to 5% for the year with comparable sales growth of 4% to 4.5%. Earnings per share growth is also expected to continue at a steady pace. For the full year the firm expects earnings per share of $3.29, up 21.4% from the previous year.
Year-to-date Lowe’s stock price has gained 3.36%, ending the day at $71.11 on Aug. 21. In the second quarter the company saw significant share buy ins from investment managers further supporting its growth. Jim Simons (Trades, Portfolio) of Renaissance Technologies LLC added Lowe’s to his portfolio as a new holding buying 346,200 shares in the second quarter for a total portfolio value increase of approximately $24.7 million. Steve Mandel (Trades, Portfolio) of Lone Pine Capital also bought shares of Lowe’s in the second quarter adding significantly to his portfolio position in the stock with a buy in of 7,053,887 shares for an approximate value of $503 million.
